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What is Employee Benefit Liability?

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employee benefit liabilityEmployee Benefit Liability is the third post in a series related to ERISA benefit plans.  For business owners with an ERISA plan like a 401k there are certain risks and insurance coverages needed.

So what is Employee Benefit Liability, often called EBL?

EBL is a form of E&O or errors and omissions insurance.  Typically attached to a company’s general liability coverage.  It protects a company from claims which allege errors in the administration of an ERISA plan.  Here’s an example.  If an employer failed to add a beneficiary to an employee’s 401k and that employee dies, a claim can be made by the beneficiary.  That claim would be for the benefits they should have received but due to an error by the employer, they’re left empty-handed.

The cost of Employee Benefit Liability coverage is cheap.  It’s usually around a hundred bucks, but that’s because the scope of coverage is pretty limited.

In a prior post, we discussed Fiduciary Liability Insurance, which protects the trustees (the employer typically) of a plan from claims which allege a breach of fiduciary duty.  EBL is NOT as broad as Fiduciary and limits protection to just errors made in a plan’s administration.  Fiduciary not only include protection from claims of breach of duty, but also claims alleging errors in administration.  As such, you don’t need to purchase both coverages.  In fact, I recommend that if you do purchase Fiduciary that you DON’T purchase Employee Benefit Liability.  Doing so could trigger the “other insurance” clause in both policies and lead to a mess if a claim occurs.

The larger your firm, the more complex these issues can be.  Have questions?  Concerns?  Let’s set up some time for a conversation and see how we might be able to help you with your corporate insurance program.  Hit the Next Steps button below!  Thanks

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